CHICAGO (Bloomberg) - Stanford Group chief financial officer James Davis will plead guilty as part of a federal probe of a $7 billion Ponzi scheme at the Texas company, his lawyer David Finn said.

Mr. Davis will continue to co-operate with the investigation and "assist the prosecution's attempts to find the billions that Stanford sent to Switzerland and other banks in Europe", Mr. Finn said yesterday in an e-mailed statement.

Davis, who was charged separately from indicted Texas financier R Allen Stanford on June 18, will initially enter a "not guilty" plea before a federal magistrate, then change that plea in a later appearance before a US District Court judge, Mr. Finn said.

Stanford and four other people were indicted by a Houston federal court jury for their roles in an alleged scheme that included the sales of certificates of deposit through Antigua-based Stanford International Bank Ltd. The financier has denied all charges of wrongdoing.

Houston Executive Assistant US Attorney Nancy Herrera said in a telephone interview that she "cannot confirm or deny anything" except that Mr. Davis will be arraigned before Magistrate Judge Calvin Botley on July 13.

Mr. Davis, 60, was charged with conspiracy to commit mail, wire and securities fraud, as well as mail fraud and conspiracy to obstruct a US Securities and Exchange Commission (SEC) investigation. Mr. Finn, in an April 9 interview with Bloomberg News, said his client had entered plea negotiations with prosecutors.

Stanford, 59, Mr. Davis and Stanford Group chief investment officer Laura Pendergest-Holt, 35, were sued by the SEC in February, accused then of running a "massive" fraud scheme centered on the Stanford bank CDs.

The first to be accused criminally, Ms Pendergest-Holt in May was indicted for allegedly obstructing the SEC's probe. While she pleaded not guilty in Houston federal court on May 14, prosecutors dropped that case after she was re-indicted with Stanford and the other defendants. Ms Pendergest-Holt pleaded innocent to the additional charges with Stanford in court last week. Her lawyer, Dan Cogdell, did not immediately return a call seeking comment on Davis's intent to plead guilty.

"To date, I believe that James Davis is the only individual to accept responsibility for his actions and to assist the Department of Justice in its attempt to return some money to the shareholders," Mr. Finn said in his e-mail.

US District Judge David Hittner on Tuesday revoked the $500,000 bail set for Stanford by a federal magistrate last week, agreeing with prosecutors' contention that Stanford was too great a flight risk to remain at large pending his trial.

Stanford's attorney, Dick DeGuerin, declined to comment on Davis's plan to plead guilty. DeGuerin said he had no timetable for appealing Stanford's revoked bond to the US 5th Circuit Court of Appeals in New Orleans.

"I think I'll go back to Hittner first with some things we've discovered that were misrepresented or just flat wrong," he said in a phone interview yesterday. Mr. DeGuerin said he hoped to have a filing ready for the judge by late today.